United States District Court, E.D. Pennsylvania
A. SITARSKI UNITED STATES MAGISTRATE JUDGE
Pending before the Court is Plaintiff's Motion for Leave
to Amend its Answers to Defendants' Counterclaims (ECF
No. 73), Defendants' Response in Opposition thereto (ECF
No. 79), and Plaintiff's Reply in Further Support (ECF
No. 81). For the following reasons, Plaintiff's
Motion will be GRANTED.
26, 2017, Homeland Insurance Company of Delaware
(“Plaintiff”) initiated the instant action
against the Devereux Foundation (“Devereux”),
seeking a declaratory judgment that it has no duty to
indemnify Devereux under two separate insurance policies
Devereux purchased from Plaintiff. (Compl. ¶ 1, 14, ECF
No. 1). Specifically, Plaintiff sought a declaration that the
policies did not provide coverage to Devereux for a loss
Devereux sustained as the result of being found liable in a
negligence suit. (Id.).
to the instant motion, on February 9, 2018, Devereux filed
its Answer, and asserted the following counterclaims against
Plaintiff: breach of contract, breach of the duty of good
faith and fair dealing, and statutory bad faith under 42 Pa.
C.S. § 8371. (See generally Answer 12-27, ECF
No. 26). Devereux also sought a declaratory judgment that
Plaintiff was obligated to provide indemnity coverage under
the 2014-2016 Policy. On March 2, 2018, Plaintiff filed its
initial Answer to Devereux's Counterclaims. (Initial
Answer, ECF 27). Plaintiff raised fifteen affirmative
defenses, including that Devereux's failure to comply
with the terms and conditions of the policies barred
coverage. (Id. at 13). Johnson was thereafter joined
as Defendant and Counterclaim Plaintiff, pursuant to the
terms of the settlement agreement reached in the underlying
December 19, 2018, Plaintiff filed its Third Amended
Complaint. (Pl.'s Third Am. Compl. ECF No. 49).
Defendants answered the Third Amended Complaint in January of
2019, raising the same Counterclaims. (Johnson's Answer,
ECF No. 59; Devereux's Answer, ECF No. 63). On February
15, 2019, Plaintiff filed its Answer to Defendants'
Counterclaims, asserting sixteen affirmative defenses.
(Answers, ECF Nos. 68 and 69). Plaintiff maintained,
inter alia, that Devereux failed to comply with the
terms and conditions of the policies and was therefore not
covered by them. (Id. at 13).
Plaintiff's counsel discovered the facts precipitating
this Motion to Amend its February 15, 2019 Answers when
reviewing the files of Devereux's defense counsel in the
underlying Johnson litigation. (Br. in Resp. Ex. A at
¶4, ECF No. 79). On December 14, 2018, Plaintiff's
counsel examined emails sent from Devereux's former
counsel, Yost & Tretta, to Johnson's counsel
regarding the negligence suit. (Id. at ¶3-5).
These emails showed that, during the summer of 2015, Devereux
and Johnson engaged in preliminary settlement
discussions.Plaintiff seeks to amend its Answers based
on these emails. Specifically, Plaintiff contends that under
the policies, Devereux was required to report settlement
discussions to Plaintiff; thus, Devereux breached these
contracts by failing to disclose the settlement discussions.
(Pl.'s Mem. Law, ECF No. 73-1, at 10). Accordingly,
Plaintiff seeks to amend its Answers to assert this defense
that Devereux's recovery on any alleged counterclaims
should be barred, or reduced, based on Devereux's breach
of the insurance contract. (Id.).
day Plaintiff discovered the emails, December 14, 2018, it
first raised with Devereux's counsel the issue of
Devereux's failure to disclose the 2015 settlement
discussions. Pl.'s Reply, ECF No. 81, at 6). On January
24, 2019, Plaintiff told Johnson that Plaintiff's
exclusion from the 2015 settlement negotiations was
“problematic.” (Id.; see also
Reply, ECF No. 81-9, Ex. I at ¶ 13-15). In late March
2019, Plaintiff informed Defendants that Plaintiff wanted to
amend its February 2019 Answers; Plaintiff again did so in an
April 3, 2019 email, and once again in person on April 23.
(Br. in Resp. 6, Reply, at 5 n.6). On April 30,
Plaintiff's counsel emailed Defendants' counsel
“[f]ollowing up on our conversation at the end of Rick
Yost's deposition” and requested Defendants
stipulate to Plaintiff adding the following defense to its
Devereux's right to recover damages (and Johnson's
right to recover damages, as Devereux's assignee) is
barred or limited by Devereux's own material breach of
(Id.). Defendants did not reply, and two days later,
on May 2, 2019, Plaintiff filed its Motion seeking leave to
amend. (Motion, ECF 73). Fact discovery closed the following
day, on May 3, 2019. (See Order, ECF No. 71). On May
14, 2019, Defendants filed their Response in Opposition. (Br.
in Resp., ECF No. 79). Plaintiff filed its Reply in Further
Support on May 21, 2019. (Pl.'s Reply, ECF No. 81).
Rule of Civil Procedure 15(a)(2) sets out the standard for
granting leave to amend an answer when, as is the case here,
a responsive pleading had been served; “a party may
amend its pleading only with the opposing party's written
consent or the court's leave.” Fed.R.Civ.P. 15(a).
“The court should freely give leave when justice so
requires, ” and the Third Circuit has held that
“motions to amend pleadings should be liberally
granted.” Fed.R.Civ.P. 15(a)(2); Long v.
Wilson, 393 F.3d 390, 400 (3d Cir. 2004). The
fundamental purpose of Rule 15 is to give a party the
opportunity to test its claim on the merits. United
States ex rel Customs Fraud Investigations, LLC v. Victaulic
Co., 839 F.3d 242, 249 (3d Cir. 2016).
to amend must generally be granted unless equitable
considerations render it otherwise unjust.” Arthur
v. Maerski, Inc., 434 F.3d 196, 204 (3d Cir. 2006)
(citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
“Among the factors that may justify denial of leave to
amend are undue delay, bad faith, and futility.”
Arthur, 434 F.3d at 204; see also Cureton v.
Nat'l Collegiate Athletic Ass'n, 252 F.3d 267,
273 (3d Cir. 2001). Given the liberal standard of Rule 15(a),
the party opposing amendment bears the burden of showing
undue delay, bad faith, prejudice, or futility.
Cureton, 252 F.3d at 273. The decision to grant or
deny a motion for leave to amend is within the sound
discretion of the district court. Id. at 272.